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Revenue Cycle Transformation

Background

The client is a private, not-for-profit hospital system located in northern New Jersey that operates more than 400 beds in two counties and has more than 14,000 annual admissions.

When its chief executive officer joined the system in 2008, the executive team identified the need to improve accounting and revenue
cycle performance. Audits found poor internal controls in finance which caused departmental operating deficiencies and weaknesses. Included in the leadership’s plan of action was a comprehensive revenue cycle assessment performed by FTI Consulting in 2011.

In early 2012, FTI Consulting presented findings that confirmed the revenue cycle opportunities and exactly where to attain them. Of particular
note was a significant opportunity to reduce bad debt expense. The CEO authorized the engagement of FTI consultants to design and construct optimal revenue cycle processes, controls and workflows as part of an ongoing larger performance improvement plan within the organization.

Approach

FTI Consulting designed and initiated the implementation of a Revenue Cycle Process
Improvement Plan which included a multi-faceted approach addressing opportunities
for improvement in people, including organization of the business office, staffing,
training, and incentives; process, including policies, procedures, and vendors; and the
technology that supports the revenue cycle.

“Dedicated key stakeholders
working closely with FTI
consultants produced
material net revenue results
and a favorable return on
investment. This revenue
cycle operation is the best I
have ever experienced.”

New Jersey Hospital System CEO

People
FTI Consulting assisted the health system in implementing a number of changes in how
its staff supports and improves performance. Among the initial actions were implementing
training programs in both patient access and patient financial services (PFS). The
patient access training program was instrumental in front-end quality assurance, while
the comprehensive PFS program supported performance of the business office staff.
FTI Consulting also assisted with reorganizing the business office, including the alignment
of individuals’ roles and responsibilities with their strengths. The business office
staff incentive plan was redefined to encourage improved performance. FTI Consulting
experts engaged AR specialists who focused specifically on government and non-government
billing and follow-up. Regularly scheduled staff meetings have been conducted to
share information and address concerns as soon as they are known.

Process
FTI Consulting was involved with developing a comprehensive accounts receivable strategy
and initiating improvements in business office quality reviews and productivity efforts,
updating workflow, policies and procedures, implementing a Revenue Cycle Committee to
oversee and coordinate activities impacting the revenue cycle and enhanced the Denials
Committee structure to improve its effectiveness in reducing denial rates.
Tactically, FTI Consulting developed cash targets by payor, identified strategy to improve
the billing clean claim rate, implemented a point-of-service collection policy with point-ofservice
collection targets and established discharged not final billed (DNFB) goals. The
project also evaluated the many revenue cycle vendors for optimal relationships, resulting
in changes to the charity/Medicaid-eligibility/self-pay vendor, addition of a low-dollar
vendor and outsourced ambulance billing.

Technology
FTI Consulting implemented a new bill editor in the business
office, an integrated advanced beneficiary notification checker
and developed a comprehensive revenue cycle dashboard to
monitor revenue cycle performance.

Net patient cash collections increased from $1,740 per total
adjusted days to $2,049 and bad debt expense, net of recoveries,
decreased by over 30 percent.

Net revenue as a percent of gross revenue improved from
19.90 percent to 23.15 percent; this performance improved
cash collection over net revenue by a combined $67 million
(adjusted for ACA Medicaid improvement).

First pass denials declined by nearly one third and net days in
accounts receivable fell by six days.

Total adjusted days to net patient services revenue yield
increased by 7.1 percent and more than $8 million in “old
cash” (aged prior to project start) was collected.

DNFB was reduced by 37 percent and credit balances
declined by more than 60 percent.

Conclusion

The CEO concluded that the combination of dedicated key stakeholders
and department heads working closely with FTI consultants
over a sustained period produced very material, positive
net revenue results. The client confirmed a favorable return on
investment for this significant effort and the CEO announced that
the revenue cycle operation is the best he has ever experienced.
Acknowledging its relationship with FTI and the exceptional revenue
cycle strategy now in place, the organization has positioned
itself well to continue achieving ongoing financial benefits.